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Alternate problem D: Use the following data for Andrea Company in preparing its planned operating budget: 2 5 Plant capacity 500,000 units Expected sales volume 450,000 units - Expected production 500,000 units 3 Forecasted selling price $ 72.00 per unit o Variable manufacturing costs per unit: 1 Direct materials $ 27.00 2 Direct labor $ 9.00 3 Manufacturing overhead $ 6.00 4 5 Fixed manufacturing overhead per period $ 900,000 6 7 Selling and administrative expenses: 8 Variable (per unit) $ 3.00 9 Fixed (per period) $ 750,000 0 Assume no beginning inventory. Federal income taxes are budgeted at 40% of income before income taxes. The actual results for Andrea Company for the 1 year ended December 31, follow. (Note: The actual sales price was $80 per unit. Actual unit production was equal to actual unit sales.) 2 3 a. Prepare a planned operating budget for the year ended December 31. b. Using a flexible operating budget, analyze the efficiency of operations by calculating the variance and indicating whether the variance is F (Favorable) or U 5 (Unfavorable). 6 4 Actual Budget A Actual Budget @ 500,000 units (given) $ 40,000,000.00 (500,000 actual x 80 actual selling price) 3 Sales 1 e B . Cost of Goods Sold: Direct Materials ($27 per unit) Direct Labor ($9 per unit) Variable Mfg Overhead ($6 per unit) Fixed Overhead Total Cost of goods sold $ $ $ $ $ 12,000,000.00 4,400,000.00 4,000,000.00 1,000,000.00 21,400,000.00 5 5 Gross Profit $ 18,600,000.00 3 1 Selling and Administrative expenses: Variable ($ 3 per unit) Fixed Total Selling and Admin expenses $ $ $ 1,400,000.00 800,000.00 2,200,000.00 2 3 Income before taxes Income tax expense (40%) Net Income $ $ 16,400,000.00 6,560,000.00 9,840,000.00 $ 3 a. Prepare a planned operating budget for the year ended December 31. Alternate Problem D: Flexible Budget Andrea Company Operating Budget For Year Ended December 31 (given) Sales Cost of Goods Sold: Direct Materials Direct Labor Variable Mfg Overhead Fixed Overhead (GIVEN) Total Cost of goods sold Gross Profit Selling and Administrative expenses: Variable Fixed (GIVEN) Total Selling and Admin expenses Income before taxes Income tax expense (40%) Net Income (given) b. Using a flexible operating budget, analyze the efficiency of operations by calculating the variance and indicating whether the variance is F (Favorable) 14 oru (Unfavorable). 75 26 27 78 29 Andrea Company Flexible Budget Performance Report For Year Ended December 31 Actual Budget @ Flexible Budget @ 500,000 units 500,000 actual units (GIVEN) F(Favorable) or U (Unfavorable) Variance Note from the Professor: Use the drop down list to indicate whether the variances are Favorable or Unfavorable. 30 81 Sales 32 33 Cost of Goods Sold: 34 Direct Materials ($27 per unit) 35 Direct Labor ($9 per unit) 36 Variable Mfg Overhead ($6 per unit) 37 Fixed Overhead 38 Total Cost of goods sold 39 0 Gross Profit 21 2 Selling and Administrative expenses: 93 Variable ($ 3 per unit) 34 Fixed 25 Total Selling and Admin expenses 26 97 Income before taxes 98 Income tax expense (40%) 99 Net Income 00 01

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